Correlation Between Algoma Steel and POSCO Holdings

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Can any of the company-specific risk be diversified away by investing in both Algoma Steel and POSCO Holdings at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Algoma Steel and POSCO Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Algoma Steel Group and POSCO Holdings, you can compare the effects of market volatilities on Algoma Steel and POSCO Holdings and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Algoma Steel with a short position of POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and POSCO Holdings.

Diversification Opportunities for Algoma Steel and POSCO Holdings

0.17
  Correlation Coefficient

Average diversification

The 3 months correlation between Algoma and POSCO is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and Algoma Steel is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Algoma Steel Group are associated (or correlated) with POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of Algoma Steel i.e., Algoma Steel and POSCO Holdings go up and down completely randomly.

Pair Corralation between Algoma Steel and POSCO Holdings

Assuming the 90 days horizon Algoma Steel Group is expected to generate 1.78 times more return on investment than POSCO Holdings. However, Algoma Steel is 1.78 times more volatile than POSCO Holdings. It trades about 0.01 of its potential returns per unit of risk. POSCO Holdings is currently generating about -0.01 per unit of risk. If you would invest  162.00  in Algoma Steel Group on October 5, 2024 and sell it today you would lose (38.00) from holding Algoma Steel Group or give up 23.46% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.56%
ValuesDaily Returns

Algoma Steel Group  vs.  POSCO Holdings

 Performance 
       Timeline  
Algoma Steel Group 

Risk-Adjusted Performance

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Over the last 90 days Algoma Steel Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's essential indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.
POSCO Holdings 

Risk-Adjusted Performance

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Weak
 
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Over the last 90 days POSCO Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Algoma Steel and POSCO Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Algoma Steel and POSCO Holdings

The main advantage of trading using opposite Algoma Steel and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, POSCO Holdings can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in POSCO Holdings will offset losses from the drop in POSCO Holdings' long position.
The idea behind Algoma Steel Group and POSCO Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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